Update on the Roadmap for Nigerian Power Sector Reform

Transcription

1 Update on the Roadmap for Nigerian Power Sector Reform Uzoma D. Achinanya Senior Special Assistant to the President of Nigeria on Electricity Distribution and Market Operations

2 Outline Overview of the Nigerian Electricity Industry The Nigerian Power Sector Reform Roadmap Tracking the Roadmap Summary

3 Overview of the Nigerian Electricity Technical Generation: Industry About 5,000MW capacity from 15 grid connected generating plants. The mix is twelve (12) thermal and three (3) hydros Ten (10) state owned and five (5) IPPs Hydro:thermal capacity ratio is 25:75 Generation ratio of the IPPs to State owned plants is 36:64

4 Overview (cont d) Technical Transmission Transmit at 330KV and 132kv Transformation capacity = 6,000MW at 330KV and 7,500MW at 132KV About 5,000Km of 330KV lines and 7,000Km of 132KV lines Average transmission loss factor = 9% Distribution Transformation capacity = 16,000MW Average distribution loss factor = 13% Access to supply = 45% Commercial No. of connections = 4.5million Average end-user tariff = N12.0/KWh ($cent 8/KWh) Average tariff paid by consumers = N8.5/KWh ($cent 5.7/KWh) Average subsidy provided by Govt. = N3.5/KWh ($cent2.3/kwh) Average monthly revenue collection = 11.5bn NGN ($77m)

5 Overview (cont d) Reform Key early reform milestones already achieved Passage of the Reform Act Establishment of the Regulatory Commission Creation of PHCN from NEPA, and unbundling of the industry into 18 Successor Companies Approval of the Market Rules Reform activities slowed down in 2007 Outstanding milestones Corporatization of the Successor Companies Commercialization of the Successor Companies Development of competitive electricity market Privatization of the Successor Companies

6 Overview (cont d) Investment of about $10.0bn required in the sector annually for the next ten years to take the country to the 2020 target of 40,000MW The private sector to be incentivized to make the investment in partnership with the Govt. There is, therefore the need to pursue and conclude the fundamental changes to the ownership, control and regulation of the power sector as outlined in the NEPP(2001) and EPSR Act 2005 However, improvement in the sector cannot wait until the industry is privatized, some sort of short to medium term improvements are necessary

7 The Roadmap for the Nigerian Power Sector Reform The FG, in response to the people s demand for real and immediate improvement in supply set up the Presidential Action Committee on Power (PACP), chaired by the President, and with most decision makers in the economy as members Simultaneously, a Presidential Task Force on Power (PTFP), was set up to carry out the day to day responsibilities of the PACP. TheTask Force is made up of technocrats and Industry Experts The PTFP developed a Roadmap (launched in August 2010) which outlines the plans to Fast track the power sector reform programme Improve service delivery in the short run Set medium to long term supply targets for the country

8 The Roadmap:-Fast tracking the reform programme Removing obstacles to private sector investments (major reform objective) Establishment of an appropriate pricing regime that supports financial viability of the sector Establishment of a Bulk Trader, adequately resourced to sign PPAs with IPPs, and sell power to the Discos. Credit enhancement to be provided to the BT in order to accelerate private sector investment in generation Operationalization of NELMCO as a Special Purpose Vehicle to assume and manage stranded assets and liabilities Addressing the concerns of the workforce which will be displaced by privatization

9 The Roadmap:-Fast tracking the reform programme (cont d) Divesting of the PHCN Successor Companies (strategies and timelines) The Generating Companies Hydro plants: strategy adopted is to grant concession for the operation of the 3 FGN hydro plants, through open tender. This strategy is predicated on the magnitude of the capital requirements and the water right issuesassociated with these plants. Thermal plants: these will be privatized via a sale of minimum of 51% equity to core investors that clearly demonstrate the technical and financial ability to operate and expand the plants All activities, including handing over of assets to be concluded during 2011 Transmission Company of Nigeria (TCN) The transmission grid is a natural monopoly, and is of critical importance to the country s security. It cannot therefore be readily opened up for competition. The strategy is to hand over TCN to a credible private sector company under a five year management contract Management contractor to be in place before end of 2011

10 The Roadmap:-Fast tracking the reform programme (cont d) Divesting of the PHCN Successor Companies (strategies and timelines) The Distribution Companies The eleven distribution companies are to be privatized, based on a core investor sale of a minimum of 51% of the government s equity in the companies. The preferred sale methodology is the Aggregate Technical, commercial and collection (ATC&C) loss reduction model. Bidders will be required to submit investment proposals and work plans for meeting the efficiency targets Target date for complete privatisation of the distribution assets is Dec. 2011

11 The Roadmap: Improving service delivery in the short run Establishing the supply gaps Setting up the targets short, medium and long term, for closing the gaps Identifying projects to facilitate gap closure

12 Establishing the Gaps Joint operation by Distribution and Transmission teams pressure tested the medium voltage networks for feeder capabilities and rejected loads Desired generation was determined from the estimated peak demand on the distribution network Desired Transmission and Distribution capabilities referenced to the desired generation, with reasonable redundancies

13 Desired Scenario Establishing the Gaps (the power cone) Generation 10,000MW Existing Scenario Transmission 12,000MW < < Distribution 15,000MW Generation =4,600MW Transmission = 5,200MW Distribution = 5,800MW

14 Roadmap short-to-medium term targets Fuel to power capacity (MWE) Generation capacity (MW) Transmissio n capability (MW) Distribution capability (MW) July 2010 Dec April 2011 Dec Dec Dec ,558 5,627 7,711 9,184 11,701 11,780 4,612 5,379 7,033 9,767 11,879 14,218 5,155 5,515 5,995 6,555 7,866 8,653 5,758 6,334 6,900 7,485 8,061 9,057

15 Immediate Actions/Targets Keep the lights on, and sustain improvements in generation capacity A summit of all key operators in the power industry was convened to discuss the Immediate Targets

16 Objectives of the Power Summit To determine the realistic position of power situation in the country To agree on the bottom lines for power generation and supply To agree on the strategies for building on the bottom lines, including revenue collection To agree on the optimization of the use of the available generation by way of Demand Side Management

17 Agreed Strategies for immediate improvement in service delivery Load Rotation Divide the country into three and supply 2/3 at a time on an 8hrs rolling blackout. This way consumers have 16hrs supply daily A sensible method of power rationing Consumers will have opportunity to predict their supply and plan in advance Improvements in generation will easily reflect in the hrs of supply to consumers Service Level Agreements (SLA) with the CEOs of the Successor Companies, based on nominations and commitments To ensure service delivery is carried out in a well-mannered and monitored manner, for which output is properly evaluated To ensure service delivery for which those directly responsible can be held truly accountable To ensure improvement in performance efficiency Energy Efficiency and Demand Side Management To release some capacity and complement power generation towards achieving the Nations peak demand

18 Tracking the Roadmap Reform On-going review of the Multi-year Tariff Order, to achieve a costreflective end-user tariff. New tariffs to be in place during 2011 Bulk Trader has been registered and licensed, credit enhancements being put in place to enable BT take off NELMCO already in place, currently being resourced for operations Investors retreat organized in Oct. 2010, bringing investors from all over the world to update them on the reform progress so far Serious engagement with the labor to discuss it s concerns, payment of some workers dues and provision of funds for payment of severance package Transaction advisers engaged by the Privatisation Agency Requests for EOIs on the Successor Companies expected to be advertised before end of Dec. 2010

19 Tracking the Roadmap (cont d) Short term improvement in supply Generation Work is progressing well on five NIPP projects expected to be commissioned by the 1 st quarter of 2011, to add 1,250MW generation capacity. Rehab of some existing plants also on-going Total addition expected by end of the short term period is about 1,500MW Transmission A major 330KV line to the Northern part of the country has just been completed, about to be commissioned. This will improve the quality of power in the NE part of the country Total of 600MVA and 360MVA transformation capacities have been added at the 330KV and 132KV levels respectively A number of projects will be completed before end of April 2011

20 Tracking the Roadmap (cont d) Short term improvement in supply Distribution A total of additional 500MW distribution capability would have been commissioned by end of Dec Work is progressing to add another MW by end of April 2011 Sum of N5.6bn has been released to execute the projects Commercial Revenue collection has improved from an average of N10bn to an average of N11.5bn Sum of N3bn has been released by the FG to the Discos for pre-payment metering and revenue enhancement programmes

21 Tracking the Roadmap (cont d) General 16hrs Load rotation program commenced nationwide on the 1 st Dec Service Level Agreements (with incentives) are currently being signed by the CEOs of the Successor Companies Performance monitoring and evaluation for the Discos started on the 1 st Dec. Those for the Gencos and TCN will commence by Jan. 2011

22 Summary Investments are urgently needed in the Country all the way alongthe electricity supply chain, viz Fuel to - power Generation Transmission Distribution The private sector is being incentivized and resourced to committhe required investments and take over the control of the electricity industry Transition to private sector owned and controlled businesses cannot happen overnight, the FG is seriously committed to improved service delivery in the short run, huge resources are being deployed for this Some of the strategies for improved service delivery include performance monitoring and evaluation, and holding people responsible for certain deliverables Government s initiatives in the sector are obviously becoming visible to the consuming public

23 Thank You Questions please!